A new report has identified good and bad practices which can inform national efforts at ‘just transition’.
The transition from coal to renewable energy is gaining pace throughout Europe. In 2015, the United Kingdom was the first country in the world to announce an explicit end to burning coal for energy production. Since then, an additional 14 EU member countries have announced that they will phase out electricity generation from coal—and a few, including Finland, France and the Netherlands, have enshrined this in law. While its end date of 2035-38 remains inadequate, Germany will also legislate a coal phase-out early this year.
But not only new laws are driving change. A host of policies across Europe aim to smooth the transition to low-carbon electricity.
While there are many successes to build on, if we are to speed up this coal-exit trend, in a just and sustainable way, it is however critical that countries avoid mistakes made by others. Working with a group of national coal experts to analyse what makes a good coal phase-out, Europe Beyond Coal and Sandbag have drawn out good and bad examples from across Europe, the results published in a report in December.
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Solving the Coal Puzzle defines nine criteria of a successful coal phase-out. For each, there are lessons to share from European countries—policies that worked well, and policies that didn‘t.
1. Ambition is key: we cannot address climate change or the extremely heavy cost of its impacts without a rapid phase-out of coal. The ambition of announced phase-out dates and pathways must be judged against the backdrop of the scientific findings of the Intergovernmental Panel on Climate Change and national coal dependence. No matter how attached they are to coal, all European countries must be coal-free by 2030 if we are to keep the temperature rise below 1.5C. While this demands major changes in infrastructure, policies and finance, a decade is more than enough time to make it happen.
Greece is an example of a country with a high coal dependence which has announced a relatively early phase-out date of 2028. In fact, its old coal plants will be closed as soon as 2023. Greece still generated 33 per cent of its electricity from lignite in 2019 and is so far the only lignite-extracting country to pledge to go coal-free.
2. Legislation is needed: to lay out the scope and speed of change, phase-out plans need to be written into law. This not only prevents the risk of backtracking with a change of government but also provides certainty for markets and helps avoid loopholes. Not many countries have translated their phase-out announcements into law yet. In February 2019, Finland was the first to do so, adopting a clear-cut ban on burning coal as of May 2029 without any caveats.
3. No one should be left behind: The phase-out should include the participation of trade unions and communities, securing a just and fair transition for those affected by the shutdown of the industry. It should also boost the regional economy. The Spanish experience shows this is possible.
In light of the obligation of most coalmines to shut down by the end of 2018, to comply with EU state-aid law, the Spanish government achieved a historic agreement with the coalmining unions. A €250 million sum was pledged to support a just transition through a variety of instruments, including early retirement, reskilling and restoration. The Ministry for Ecological Transition will authorise the closure of coal plants only when operators present a just-transition plan for the workers.
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4. There must be investment in renewables: wind and solar investment should be explicitly linked to closing coal plants. Only wind and solar give the full benefits of a coal phase-out, in terms of jobs, investment, energy self-sufficiency, cheap energy, clean air and reduced CO2emissions.
The Dutch climate agreement is the best example. It aims at a renewable share of 70 per cent in electricity generation by 2030—up from 15 per cent in 2018, in only 12 years. The coal phase-out was announced at the same time as the climate package was announced, envisioning an explicit coal-to-clean transition.
5. Gas and biomass are not bridges: the climate benefits of gas and bioenergy are not what they promise—natural gas is still a climate-damaging fossil fuel, which leaks methane, and biomass life-cycle emissions are far from zero. Due to the high Dutch renewables target, no new fossil-gas plants will need to be built there, and the use of existing gas plants will likely reduce by 2030.
6. Flexibility must be built in: governments and companies should maximise investment in electricity storage, interconnectors and demand response, to guarantee a reliable electricity supply. Here too the Netherlands models best practice, including via new interconnectors (with the UK, Germany and Belgium and, in train, Denmark) and converting hydrogen to power.
7. There must be a carbon price for coal: carbon pricing can help to accelerate coal-plant closures, as well as to finance the transition and reduce fuel poverty. By improving its Emissions Trading System, the EU as a whole showed that a carbon market can work. Following a reform in 2017, the carbon price rose to the reasonable level of €15-30 per tonne.
The price in 2019 of around €25 per tonne affected coal power plants in two ways. First, it stripped away profitability, making an estimated four out of five coal plants uneconomic in Europe. Secondly, it meant wind and solar could often compete without subsidies, encouraging governments to scale up substantially their renewables ambitions.
8. The worst polluters should be scrapped first: the dirtiest coal plants should close first, to realise immediate health benefits. The EU has a good process of tightening air-pollution standards, which forces the dirtiest coal plants to invest or close. Under the Industrial Emissions Directive ‘best reference’ (BREF) policy, standards are updated every seven years. In 2021, SO2 and NO limits will tighten substantially and many plants across Europe will not be able to comply. Utilities must then choose: do they invest more money in old coal plants or do they close them?
9. Rent-seeking should not be rewarded: taxpayers’ money should not be used to compensate polluters for closing plants. The writing has been on the wall for a very long time and those who have refused to move with the times should not be rewarded for bad decisions. Bailing out fossil fuel companies creates perverse incentives, slowing the transition and making a phase-out unnecessarily expensive.
The Finnish experience shows that polluters cannot count on compensation. In a significant ruling, its Constitutional Law Committee decided that companies and other traders could not reasonably expect the legislation governing their business to remain unchanged. Furthermore, it ruled that ‘responsibility for the environment’ overrode commercial claims brought forward by the energy companies.
Swift and effective
No country so far has solutions which tick all the boxes. The policy guide by Europe Beyond Coal and Sandbag aims rather to inform experts looking to implement a swift and effective coal phase-out in their country and eventually to enable others to leapfrog into a 100 per cent renewable future.